explanatory statement
ISSUED BY THE MINISTER FOR FINANCE AND DEREGULATION
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
DECLARATION UNDER PARAGRAPH 3E(1)(a)
SUPERANNUATION (PRODUCTIVITY BENEFIT) (2010-2011 FIRST INTEREST FACTOR) DECLARATION 2010
The Superannuation (Productivity Benefit) Act 1988 (the PB Act) provides superannuation arrangements, based on the minimum employer superannuation requirements in the Superannuation Guarantee (Administration) Act 1992, for certain Australian Government employees, office holders and contractors (employees).
The superannuation arrangements under the PB Act were closed to new employees from 1 July 2006. However, they continue to apply to persons who were covered by the Act on 30 June 2006 until they cease relevant employment or become a member of an Australian Government superannuation scheme.
The employer superannuation contributions provided for under the PB Act are guaranteed to employees where an employer fails to join the employee to a fund to receive those contributions. In such cases, extra amounts are payable by the employer in respect of interest that may have been earned had those contributions been paid to a fund. These additional amounts are calculated by applying the first interest factor for a financial year to the contributions that were due to be paid, but were not paid, in that year and the second interest factor in respect of any later years.
Paragraph 3E(1)(a) of the PB Act requires the Minister to declare, before each financial year, the factor ascertained using a specified formula that is to be the declared first interest factor for that year.
The Declaration, cited as the Superannuation (Productivity Benefit) (2010-2011 First Interest Factor) Declaration 2010, specifies the formula for the first interest factor to be used for the 2010-2011 financial year. The formula emulates the periodic interest that would have been earned during the year had the contributions been held in a fund.
The first interest factor is used in section 8A of the PB Act to accrue interest on unpaid employer contributions for the 2010-2011 financial year, as if they had been paid into a fund in regular payments throughout the year, based on the 10 year Treasury Bond rate for April 2010 of 5.71 per cent.
The Declaration should be read in conjunction with the Superannuation (Productivity Benefit) (2010-2011 Second Interest Factor) Declaration 2010.
The Declaration is a legislative instrument for the purposes of the Legislative Instruments Act 2003 (LI Act).
No consultation was undertaken in relation to the Declaration. In accordance with paragraph 18(2)(a) of the LI Act, consultation was considered to be unnecessary because the instrument is of a minor or machinery nature.
The Declaration commences on 1 July 2010.
Overview
The Superannuation (Productivity Benefit) (2010-2011 First Interest Factor) Declaration 2010, issued under the Superannuation (Productivity Benefit) Act 1988, outlines the first interest factor to be applied for the financial year 2010-2011. This Act, which was introduced to address the need for specific superannuation arrangements for certain Australian Government employees, office holders, and contractors, was enacted to ensure that employer superannuation contributions are guaranteed, including interest accruals in cases where employers fail to make the required payments. The Declaration is a legislative instrument under the Legislative Instruments Act 2003, which specifies the formula for calculating the first interest factor based on the periodic interest that would have been earned if contributions had been paid into a fund, using the 10 year Treasury Bond rate for April 2010. The declaration was issued by the Minister for Finance and Deregulation and is effective from 1 July 2010, with no consultation deemed necessary as it is of a minor or machinery nature.
Scope and Application
The Superannuation (Productivity Benefit) (2010-2011 First Interest Factor) Declaration 2010 applies to Australian Government employees, office holders, and contractors who were covered by the Superannuation (Productivity Benefit) Act 1988 as of 30 June 2006, ensuring they receive guaranteed superannuation arrangements in the event of employer non-compliance. This legislation is of a Commonwealth nature and is intended to supplement the Superannuation Guarantee (Administration) Act 1992. The Act specifies that for the 2010-2011 financial year, the first interest factor for calculating unpaid employer contributions is to be 5.71 per cent, reflecting the 10 year Treasury Bond rate for April 2010. This factor is used to accrue interest as if the contributions had been paid into a fund in regular payments throughout the year. The Declaration should be read in conjunction with the Superannuation (Productivity Benefit) (2010-2011 Second Interest Factor) Declaration 2010. As a legislative instrument under the Legislative Instruments Act 2003, the Declaration was issued without consultation due to its minor and machinery nature, and it commenced on 1 July 2010.
Key Provisions
The Superannuation (Productivity Benefit) (2010-2011 First Interest Factor) Declaration 2010 is a legislative instrument that sets out the first interest factor to be used for the 2010-2011 financial year under the Superannuation (Productivity Benefit) Act 1988 (the PB Act). According to section 3E(1)(a) of the PB Act, the Minister is required to declare this factor before each financial year, using a specified formula that emulates the periodic interest that would have been earned during the year had the contributions been held in a fund (section 8A). This year, the formula is based on the 10 year Treasury Bond rate for April 2010 of 5.71 per cent. The Declaration should be read in conjunction with the Superannuation (Productivity Benefit) (2010-2011 Second Interest Factor) Declaration 2010. It is important to note that no consultation was undertaken in relation to this Declaration as it was deemed to be of a minor or machinery nature under the Legislative Instruments Act 2003.
The PB Act imposes certain obligations on employers who are required to make superannuation contributions under the Act. These obligations include ensuring that contributions are made to a fund in a timely manner, and if they fail to do so, they must pay extra amounts in respect of interest that may have been earned had the contributions been paid to a fund. The first interest factor is used to calculate these extra amounts for the 2010-2011 financial year. The Act also requires employers to guarantee the superannuation arrangements provided for under the PB Act to employees, even in cases where an employer fails to join the employee to a fund to receive those contributions.
Failure to comply with the obligations and requirements of the PB Act can result in offences, penalties, or civil/criminal consequences. However, the Explanatory Statement does not provide information on the specific maximum penalties for breaches of the Act. It is important for employers to be aware of their obligations and to take steps to ensure compliance with the Act to avoid any potential penalties or consequences.
In summary, the Superannuation (Productivity Benefit) (2010-2011 First Interest Factor) Declaration 2010 sets out the first interest factor to be used for the 2010-2011 financial year under the PB Act. Employers who are required to make superannuation contributions under the Act have certain obligations to ensure timely payments and to guarantee the superannuation arrangements provided for under the Act to employees. Failure to comply with the Act can result in offences, penalties, or civil/criminal consequences, although the specific maximum penalties are not stated in the Explanatory Statement.